Title: Trump's Claims on Reducing Home Buying Costs: A Comprehensive Look
Americans struggling to purchase homes due to sky-high prices are not just battling market forces, but also regulatory hurdles. A recent analysis, echoing a study by the National Association of Homebuilders (NAHB), indicates that government regulations account for a staggering 25% of the cost of constructing a new home. This equates to an eye-watering $93,870 on the average sales price of a new single-family home, a figure that has only grown with time.
Trump's executive action, signed last week, aims to address this issue by cutting regulatory requirements. However, the document offers few concrete solutions, leaving experts wondering whether it will be enough to lower housing costs. The Federal Government might hold some sway, but many regulations are enforced by state and local authorities, making this an uphill battle.
In addition to regulatory issues, the US housing market is under strain due to a severe supply shortage. The growing millennial population, eager to buy homes, is amplifying this issue. Soaring interest rates and exorbitant closing costs are further exacerbating the problem.
The Trump administration's promise to lower interest rates went unfulfilled, as the Federal Reserve pursued a campaign to tame inflation with recent interest rate hikes. Meanwhile, closing costs have witnessed a steep increase, reaching a median of $6,000 in 2022, up 22% from 2021.
The Biden administration's crackdown on "junk fees" hidden in closing costs appeared to offer some reprieve. However, its future remains uncertain under the Trump administration, which could continue or scrap this initiative.
Meanwhile, Trump's planned tariffs on Mexican and Canadian goods, and potential mass deportations, could challenge the efforts to lower housing costs. A 25% tariff on Canadian lumber, widely used by homebuilders, would significantly increase construction costs. Deportations could also hike construction labor costs, as the industry grapples with a workforce shortage.
Despite these challenges, efforts to streamline regulations, diversify supply chains, and upskill the domestic workforce offer a glimmer of hope. If managed correctly, these measures could help alleviate the regulatory, supply, and labor burdens that keep housing unaffordable for many Americans.
The Trump administration's executive action aiming to reduce regulatory requirements could potentially lower construction costs for new businesses involved in homebuilding. High closing costs, including the median of $6,000 in 2022, are a significant burden not only for individuals purchasing homes but also for businesses constructing new properties.
